The Fannie Mae and Freddie Mac Bailout

BAIL OUT BAIL OUT BAIL OUT!!!

I've heard, read and said the term "bail-out" more in the past week then a big wave surfer. The news of the GOV taking over Freddie and Fannie have a lot of people asking a lot of questions.

My thoughts

My gut instinct with the bailout is that the short sale opportunities we are after will remain the same. It is my understanding that although the gov can guarantee a new loan for the homeowner to re-fi their current property, it is up to the bank to first grant permission for owner to do so. Many of the sellers we are dealing with can’t even afford to rent back from us, in turn that means they can’t afford the home at fair market value and in my mind there is no way they will be approved for a newly structured loan to keep their home. I think the only people this will actually help are the ones that were honest in the beginning when applying for the original loan. If borrowers were straight about their income and debt, were approved for a loan under those terms and those loans then turned out “bad” due to broker negligence they should be able to afford a newly structured loan to keep their home. What we are dealing with however are owners who applied for loans with a stated income that was grossly over estimated, went forward with interest only loans, did 100% financing or all of the above. It is my opinion that these homeowners will continue to take the brunt and will not, nor should be bailed out. Only time will tell, but I hope I am correct. It’s simply unjust for all of these speculators and irresponsible borrowers to be allowed to stay in these homes when they are the main reason the market is where it is. To summarize, I don’t think the institutions will take a “wait and see” attitude unless the current owner is a responsible individual with an income to debt ratio that merits a new loan. A short sale is only possible when a homeowner submits a letter of hardship, if you had a hardship letter in your hand, would you loan more money to that individual? I wouldn’t and I hope the banks won’t either.